Reed's, Inc. Announces Second Quarter 2009 Financial Results

LOS ANGELES, CA–(Marketwire – August 14, 2009) – Reed’s, Inc. (NASDAQ: REED), maker of the top-selling sodas in natural food stores nationwide, today announced its financial results for the second quarter ended June 30, 2009.

Second Quarter and Six Month 2009 Highlights:

 --  Sale-leaseback agreement reduced long-term mortgage debt by $1.8     million and netted proceeds of $1 million to the Company; --  Positive EBITDA of $134,000 in Q2 2009 versus a EBITDA loss of     $397,000 in Q2 2008 (see EBITDA schedule attached); --  Gross profit margin increased to 26% of sales during the six months     ended June 30, 2009 from 22% in the same period of 2008; --  Cash and cash equivalents increased to $421,000 as of June 30, 2009,     compared to $229,000 as of December 31, 2008; --  Working capital increased to $1.8 million as of June 30, 2009, a $1.2     million improvement from December 31, 2008; --  Continued to maintain a much lower cost structure in the first six     months of 2009, than in 2008, covering both operating expenses and per-unit     cost of sales; --  Q2 2009 Net Sales decreased 8% to $4.2 million compared to Q2 2008 due     to a non-repeat specialty program in 2008.  Sales from primary product     lines increased by 15% in Q2 2009 over Q2 2008; --  Loss from operations of $752,000 in Q2 2009 was primarily due to non-     cash impairment write downs on fixed assets of $641,000.  Before impairment     losses, the net loss from operations in Q2 2009 was $118,000, an     improvement from the loss of $441,000 in Q2 2008.     

Additional Highlights:

 --  Began shipments of all new Natural Energy Elixir; --  Announced expanded relationship with 1,400 Kroger-owned (NYSE: KR)     supermarkets, and a number of other regional and nationwide chains; --  Announced significant new distribution relationships on both coasts.     

“We’re pleased with our overall performance in Q2. Although our revenues and gross profits were down slightly, we feel fortunate that our solid brand identity and loyal customer base carried us through,” commented Mr. Chris Reed, Founder, Chairman and CEO of Reed’s, Inc.

“Some of our peers experienced significant erosion in sales, with many high-end brands declining 30% or more during one of the worst economic times of our generation. Meanwhile, our core product line sales and volume increased by over 15%, representing expansion of our sales channels. We believe that our targeted promotional activities are producing good results, and we plan to continue with these over the next year.”

Mr. Reed continued, “The results for Q2 reflect a continued reduction in our costs of goods sold, along with a decrease in our operating costs, as compared to the prior year period. Price discounting eroded our gross margins a bit this quarter, but our year-to-date gross margins are ahead of the prior year period.”

“In the last quarter we launched our all new Natural Energy Elixir, a product that we feel is in a class by itself. We also expanded with some key distribution agreements on both coasts. Our presence in Kroger stores nationwide increased to over 1,400 stores, and we are making significant inroads with getting our products displayed in the mainstream beverage aisles of major chains,” stated Mr. Reed.

“Looking ahead, we are launching our private label business initiative, which is complementary to our branded lines and is expected to increase overall revenues and margins. The funding from our completed sale-leaseback transaction has improved our working capital position, while we proceed on a path toward healthy income from operations. Also, early in the third quarter we retained Pacific Capital Growth Advisors, a strategic advisory firm focused on the natural products and healthy living space. We feel that Reed’s has reached a critical size where larger players look for strategic relationships, and we are receiving a pretty healthy turnout of national and international players looking at us. It’s too soon to tell what this will produce, but we are encouraged by the early feedback,” concluded Mr. Reed.

See financial statements and EBITDA schedule at the end of this release.

About Reed’s, Inc.

Reed’s, Inc. makes the top-selling sodas in natural food markets nationwide and is currently selling in 10,500 supermarkets in natural foods and mainstream. Its six award-winning non-alcoholic Ginger Brews are unique in the beverage industry, being brewed, not manufactured and using fresh ginger, spices and fruits in a brewing process that predates commercial soft drinks. In addition, the Company owns the top-selling root beer line in natural foods, the Virgil’s Root Beer product line, and the top-selling cola line in natural foods, the China Cola product line. Other product lines include: Reed’s Ginger Candies and Reed’s Ginger Ice Creams.

Reed’s products are sold through specialty gourmet and natural food stores, mainstream supermarket chains, retail stores and restaurants nationwide, and in Canada. For more information about Reed’s, please visit the company’s website at: http://www.reedsgingerbrew.com or call 800-99-REEDS.

Follow Reed’s on Twitter at: http://www.twitter.com/reedsgingerbrew

View Reed’s YouTube channel at: http://www.youtube.com/reedsgingerbrew

Review Reed’s Delicious bookmarks at: http://www.delicious.com/reedsinc

Join Reed’s Facebook Fan Page at: http://www.facebook.com/pages/Reeds-Ginger-Brew-and-Virgils-Natural-Sodas/57143529039?ref=nf

Subscribe to Reed’s RSS feed at: http://www.irthcommunications.com/REED_rss.xml

More information can be found at: http://www.irthcommunications.com/clients_REED.php

SAFE HARBOR STATEMENT

Some portions of this press release, particularly those describing Reed’s goals and strategies, contain “forward-looking statements.” These forward-looking statements can generally be identified as such because the context of the statement will include words, such as “expects,” “should,” “believes,” “anticipates” or words of similar import. Similarly, statements that describe future plans, objectives or goals are also forward-looking statements. While Reed’s is working to achieve those goals and strategies, actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties. These risks and uncertainties include difficulty in marketing its products and services, maintaining and protecting brand recognition, the need for significant capital, dependence on third party distributors, dependence on third party brewers, increasing costs of fuel and freight, protection of intellectual property, competition and other factors, any of which could have an adverse effect on the business plans of Reed’s, its reputation in the industry or its expected financial return from operations and results of operations. In light of significant risks and uncertainties inherent in forward-looking statements included herein, the inclusion of such statements should not be regarded as a representation by Reed’s that they will achieve such forward-looking statements. For further details and a discussion of these and other risks and uncertainties, please see our most recent reports on Form 10-KSB and Form 10-Q, as filed with the Securities and Exchange Commission, as they may be amended from time to time. Reed’s undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.

                             REED'S, INC.                       CONDENSED BALANCE SHEETS                                                     June 30,    December 31,                                                     2009          2008                                                 ------------  ------------  ASSETS                                         (unaudited)  Current assets:    Cash                                         $    421,000  $    229,000    Inventory                                       3,375,000     2,837,000    Trade accounts receivable, net of     allowance for doubtful accounts and     returns and discounts of $97,000 as of     June 30, 2009 and December 31, 2008            1,356,000       897,000    Prepaid and other current assets                  178,000        68,000                                                 ------------  ------------       Total Current Assets                         5,330,000     4,031,000   Property and equipment, net of accumulated   depreciation of $530,000 as of June 30, 2009   and $1,150,000 as of December 31, 2008           3,431,000     4,133,000  Brand names                                         800,000       800,000  Deferred offering costs                             161,000        62,000  Deferred financing fees                             651,000        77,000                                                 ------------  ------------        Total assets                              $ 10,373,000  $  9,103,000                                                 ============  ============   LIABILITIES AND STOCKHOLDERS' EQUITY  Current Liabilities:    Accounts payable                             $  2,372,000  $  1,929,000    Lines of credit                                   974,000     1,354,000    Current portion of long term debt                       -        16,000    Current portion of long term financing     obligation                                        19,000             -    Accrued interest                                   33,000             -    Accrued expenses                                  108,000        96,000                                                 ------------  ------------       Total current liabilities                    3,506,000     3,395,000   Long term financing obligation, less current   portion                                          3,022,000             -                                                 ------------  ------------  Long term debt, less current portion                      -     1,747,000                                                 ------------  ------------       Total Liabilities                            6,528,000     5,142,000                                                 ------------  ------------   Commitments and contingencies   Stockholders' equity:    Preferred stock, $10 par value, 500,000     shares authorized, 46,621 shares     outstanding at June 30, 2009 and 47,121     shares outstanding at December 31, 2008          466,000       471,000    Series B Convertible Preferred stock, $.0001     par value, no shares issued or outstanding     at June 30, 2009 and December 31, 2008                 -             -    Common stock, $.0001 par value, 19,500,000     shares authorized, 9,200,693 shares issued     and outstanding at June 30, 2009 and     8,979,341 shares issued and outstanding at     December 31, 2008                                  1,000         1,000    Additional paid in capital                     19,691,000    18,408,000    Accumulated deficit                           (16,313,000)  (14,919,000)                                                 ------------  ------------       Total stockholders' equity                   3,845,000     3,961,000                                                 ------------  ------------        Total liabilities and stockholders'        equity                                   $ 10,373,000  $  9,103,000                                                 ============  ============                                 REED'S, INC.                   CONDENSED STATEMENTS OF OPERATIONS    For the Three Months and Six Months Ended June 30, 2009 and 2008                               (Unaudited)                            Three months ended           Six months ended                              June 30,                    June 30,                     --------------------------  --------------------------                         2009          2008          2009          2008                     ------------  ------------  ------------  ------------  Sales               $  4,214,000  $  4,571,000  $  7,631,000  $  8,135,000 Cost of sales          3,114,000     3,302,000     5,684,000     6,346,000                     ------------  ------------  ------------  ------------      Gross profit       1,100,000     1,269,000     1,947,000     1,789,000                     ------------  ------------  ------------  ------------  Operating  expenses: Selling and  marketing expense       548,000     1,051,000     1,207,000     2,175,000 General and  administrative  expense                 670,000       659,000     1,273,000     1,990,000 Impairment of  assets                  641,000             -       641,000             -                     ------------  ------------  ------------  ------------   Total operating    expenses            1,859,000     1,710,000     3,121,000     4,165,000                     ------------  ------------  ------------  ------------      Loss from      operations         (759,000)     (441,000)   (1,174,000)   (2,376,000)  Interest income                -             -             -         1,000 Interest expense        (114,000)      (50,000)     (197,000)     (106,000)                     ------------  ------------  ------------  ------------      Net loss            (873,000)     (491,000)   (1,371,000)   (2,481,000)  Preferred stock  dividend                (23,000)      (24,000)      (23,000)      (24,000)                     ------------  ------------  ------------  ------------ Net loss  attributable to  common  stockholders       $   (896,000) $   (515,000) $ (1,394,000) $ (2,505,000)                     ============  ============  ============  ============  Loss per share -  available to  common  stockholders -  basic and diluted  $      (0.10) $      (0.06) $      (0.15) $      (0.28)                     ============  ============  ============  ============ Weighted average  number of shares  outstanding -  basic and diluted     9,119,099     8,911,327     9,080,506     8,837,956                     ============  ============  ============  ============                                REED'S, INC.                            EBITDA SCHEDULE    For the Three Months and Six Months Ended June 30, 2009 and 2008                             (Unaudited)                          Three months ended           Six months ended                               June 30,                   June 30,                     --------------------------  --------------------------                         2009          2008          2009          2008                     ------------  ------------  ------------  ------------ Net loss            $   (873,000) $   (491,000) $ (1,371,000) $ (2,481,000)                     ------------  ------------  ------------  ------------  EBITDA  adjustments: Depreciation and  amortization            130,000        77,000       239,000       165,000 Interest expense         114,000        50,000       197,000       105,000 Stock option  compensation            122,000       (33,000)      269,000       (61,000) Impairment of  assets                  641,000             -       641,000             -                     ------------  ------------  ------------  ------------   Total EBITDA    adjustments         1,859,000     1,710,000     3,121,000     4,165,000                     ------------  ------------  ------------  ------------  EBITDA income  (loss) from  operations         $    134,000  $   (397,000) $    (25,000) $ (2,272,000)                     ============  ============  ============  ============   The Company defines EBITDA as net loss before interest, taxes, depreciation and amortization, and non-cash expense for securities.  Other companies may calculate EBITDA differently.  Management believes that the presentation of EBITDA provides a meaningful measure of performance that approximates cash flow before interest expense, and is meaningful to investors.